Tesco is due to announce the result of its investigation into its accounting scandal along with its half-yearly results on Thursday, and the Telegraphgot first wind of Tesco’s report into its accounting “irregularities” a few days ahead of publication. The ever-diligent Ian Fraser was quick off the mark on Twitter:

And when I retweeted this, Jamie Saunders, who runs futuresedge in his spare time (“this isn’t my job, it’s a hobby”, as Clara said recently on Dr. Who), sent me an interesting question as to whether this was actually about an absence of checks and balances. But actually, it’s worse than that.

Over at The Futures Company blog I have a short post on Tesco’s problems, prompted by the abrupt dismissal of its Chief Executive Philip Clarke in the face of the continuing pressure on the company’s market share and profitability.

For non-British readers,Tesco is (still) Britain’s largest supermarket, but having been utterly dominant in the 1990s, has been struggling for much of the past decade.

The first thing I said in the post was that the food market had become more complex since the financial crisis, and Tesco hadn’t been able to follow. This normally translates into a story about being “assailed by discounters”, but the discount proposition isn’t just about price. People who advise Tesco to turn its attention to fighting with discounters on price show they don’t really understand how the market has changed.

I read earlier this year Richard Rumelt’s book Good Strategy Bad Strategy, much acclaimed when it was published in 2011. And you can see why: it is lucid, well-writtem, and largely free of jargon, which already marks it out from the average business book. It also has a clear view of what strategy is (and what it is not), which is welcome, given how much the word is abused. And the business stories he tells illuminate his argument.

Rumelt is entertaining on the differences between bad strategy and good strategy – and I’ll come back to the bad strategy later. Good strategy, he says, is composed of a kernel of three elements (p77):

A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the complexity by identifying the critical aspects of the situations.

A guiding policy for dealing with the challenge.

A set of coherent actions that are designed to carry out the guiding policy.

In particular, I found his advice on diagnosis valuable. A good diagnosis “should replace the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects.” This is, in effect, a sense making exercise. And a good strategic diagnosis does a second critical thing: “it also defines a domain of action.” Good strategy can then be built on a diagnosis that points to areas of leverage over outcomes. (more…)

In the first part of this post, I looked at the impact of the economy, and its business history, on HMV’s collapse. In this second part, I’m going to turn my attention to changes in the music market, the impact of the internet (there’s two stories here, not one), and the business’ strategic reponse.(more…)

The received wisdom about the collapse of the British entertainment chain HMV and its acquisition by the distress specialists Hilco is that it didn’t see the internet coming. And doh! Actually, the truth has a lot more to do with economics and the way finance dominates business. This long post is broken into two parts: part 2 is here.

The immediate cause of HMV’s collapse, of course, was the British recession, which has gone on longer than anyone expected, and the economy is now teetering on the edge of an unprecedented triple dip recession. Here’s the NIESR chart showing comparative GDP since the pre-recession peak for the past six recessions. The black line at the bottom is the current recession, and yes, this chart should be on the wall of every economic policymaker in the UK.

The Barclays story is an example of what happens when an organisation’s ‘Core Group’ turns malign

In my last post I wrote about how Art Kleiner’s idea of the Core Group helped us to understand Barclay’s recent history. In this post I am going to develop this idea. If Bob Diamond survived in his position despite his division breaching the rules in 1998 because he’d become a member of the Core Group, we still need to understand why. In the rest of this post I am going to go further into the history.

How the idea of the ‘Core Group’ helps us understand the Barclays’ rate-fixing scandal

Much of the writing on Barclay’s rate-fixing scandal – which has forced the resignations of both the chief executive, Bob Diamond, and the chairman, Marcus Agius – focused on issues of culture, but without asking where culture inside organisations comes from or how it is set, other than maybe an over-simple idea that it comes ‘from the top’. Of course, some of the interest in culture was prompted by the ex-Chief Executive, Bob Diamond, in the BBC lecture he gave last year, which I imagine seemed like a good idea at the time. Andrew Rawnsley quoted a couple of lines in an article in the Observer earlier this month:

“Culture,” he [Diamond] said in a BBC lecture last year, “is difficult to define. But for me the evidence of culture is how people behave when no one is watching.”

So it seems a good idea to look at this through the lens of Art Kleiner’s neglected book, Who Really Matters: The Core Group.

Business risk is usually an exercise in corporate power. But your own business assumptions are about to become a risk in their own right.

A few months ago, I wrote about risk – suggesting that the ‘discipline’ of risk management tended to focus on risks which were (a) understood and (b) for which probabilities could be estimated, and that this led to far too narrow a view of risk. In particular, this meant that companies were usually very poor at assessing their blindspots. This second post has taken longer to write than I expected, but in this one I’m going to look at the factors which mean that companies tend to remain blinded by their blindspots.

BP’s oil disaster is partly the result of approaches to risk which lead us to believe we know more than we do.

It’s hard to know where to start with the BP oil disaster. Commentary has been gushing out almost as quickly as oil. We know the scale of the pollution, and have read ecologists who say the conditions are unlike any other seen on earth, certainly in the anthropocene period. Dark humour is one response; angry satire is another (The Onion: ‘Massive Flow Of Bullshit Continues To Gush From BP Headquarters‘).We have a good idea that BP’s conduct over the drilling was somewhere between careless and reckless (and that sooner or later a court is likely to decide on which), and that regulatory agencies were compliant or ineffective. One area that seems to deserve more thought – especially from a futures perspective – is the way in which essentially man-made disasters such as this are to a significant extent produced by a limited set of ideas about risk, both the way it gets assessed and the way it is managed.